Closing on another 12 plex seller financed

Your real estate portfolio is underwater, but we've got zero people in the chat, so that means we're safe to talk about whatever we want.

I'm just kidding, this will get posted. Hello everyone and welcome to Creative Finance Live. Today we just closed, so we're celebrating with, uh, with hot tubbing, and my computer is dead, so I figured why get up and try to set the phone up inside when I can set it up right here from the hot tub?

I sure hope your phone has battery.

Hey, you know what, we're gonna find out. I believe it does.

It's either gonna go well or it won't, but welcome.

As people filter into the chat, which they'll do at some point. Welcome, Cody. What did we knock out today?

Well, today we did a few fun things. I'm gonna set my phone there so it doesn't fall in the hot tub. So we just signed for a $2.3 million bank loan, which is super exciting. That is our third bank loan.

That is our third bank loan and my sixth bank loan.

Wow, a little bit, uh, more exposed than I am. But yeah, I have got, uh, this will be my third bank loan. We got some people joining the chat. Hey everybody, But $2.3 million for an asset we bought not that long ago for $2 million. So that's a little more better.

Yeah, while we're not a huge fan of the BRRRR model, that was better than a— that was a full BRRRR plus. We got all the money back out and now we're using it to renovate. We probably have about a million in renovation we need to do. So it's really only a third of the reno budget that we want.

Yeah, we're doing $300,000 in reno and what's that's gonna encompass? So we've got about $80,000 in windows, siding, and paint. So $80,000 of our $320,000 budget later, we're gonna have 75% of the money left. So we'll have about $240,000 left. We're gonna hammer out our units. It's about $13,000 a unit, and we're gonna do 15 of them over the next year or so. So that'll blow through another, what, 15 times $13,000, we're talking $195,000. So that'll be fun.

Yep. And while passive income is only a tax designation, it's not truly passive. It's a ton of work. We are in the hot tub today because that has been a lot of work to get it from A to B, and we are celebrating the wins.

And we are buying a 12-plex that is seller financed. That is, uh, that's with our good friend Trevor and Erica. So we've been, uh, well, at least I've known them for about 4 years.

I've known them for about 2 and a half. I knew them before we partnered.

Yeah, so long time friends. They've been there since the very beginning. I actually realized earlier today that they were the only people that are still in my real estate universe that I've known since I got started back in 2019. So that was crazy. That was really fun. Everybody else has left. Everyone else has done their own thing or gone corrupt. It's been an adventure. But yeah, so we just did our first deal with them. I've got a couple other deals we're looking at potentially doing with them. 5-plex, 21-plex. If you're watching this, I haven't told you all of it yet, but if you ever see this, Trevor, surprise. But looking at doing some more deals with them. They're one of my very favorite real estate agents and traditional financing lenders for small residential assets.

Now, always start putting your comments— like always, start putting your comments in the chat, ask your questions here. There's two things we're going to talk about first while we accumulate some questions, and then we're gonna roll. So number one, I want to talk about the economy, the banks. There's a lot of people— I've even seen some of the BiggerPockets crew posting no one's making money in real estate. That's just not true. So we're going to address that here on the channel. Then let's talk a little bit more about that 12-plex deal because that closes tomorrow, and we just got all the accounts and funding set up. So that is as good as done. It just needs to do the final recording process. So let's start with the economy. We've seen a couple banks go down. Banks are tightening up. People are worried about money. And we are at that part of the year where we've been at variable interest debt long enough where the syndicators who all had variable interest debt are now starting to lose their real estate.

A lot of real estate. Now, it's a nightmare.

Now, this is not a, hey, we knew everything and we're— look at us, we're the best. But we— this was foreseeable and We have been shouting that from the rooftops for about 2 years of our 1.5-year partnership.

Did we know that rates were gonna go up as fast as they did? Absolutely not. We would have never guessed that. However, we have been telling everybody— we've been the fixed-rate, long-term debt guys— to fix your variables. We've said that since the very beginning.

Variables suck.

You don't want your world shifted on you. If all the things you know to be true change, if the goalposts you were shooting at happen to be in a different location tomorrow than they are today, it's hard to hard to predict success. So for all the people that didn't control their variables, I'm sorry, but you're probably going through pain right now.

If you have variable rate debt, and granted, I have a HELOC that's variable on my house. So there. And I wish I didn't make it variable, and it's my money and my equity. If you went out and raised other people's money on variable rates that you cannot control, I have a responsibility issue with that. And a lot of people are paying the price right now. However, we are getting a lot of comments the last 2 weeks. Oh man, you guys you guys must be really hurting with your high loan-to-values, and we're going to dispel some of that right now.

Oh yeah, our sub-60% LTVs.

Yeah, are we still there after the refi?

We are.

Oh, there we go. So we're still sitting right around 59% loan-to-value. We bought on long-term cash-flowing fixed-rate debt, which means as the market goes down or has turbulence, all of our debts, uh, except for very few very small ones that we're going to pay off in cash, we have 5, 10, 15, and 30-year debts. We will be in a different economy for all of those, and we'll be in a cash position for every single one of those.

Yeah, we just pulled out more money out of the portfolio to fix stuff up. We owe $13 million on a $21 million portfolio, so we're a little over 60%, a tad bit. Yeah, but that's just because we pulled money out.

There is only one thing that I would say that Cody and I are the actual best at online. Everything else, there's so much about real estate out there, but I think we've done better than anyone else in distilling real estate to its simplest form. How do we buy it? How do we never lose it? Is it going to be fun? Because if we answer those 3 things, we get to have a a lot of fun and buy more real estate. Exactly. Every time you buy a deal, it makes you more money. It's a long-term fixed rate debt, which means in any economy you buy a deal like that, you just make more every single month.

Yeah, I'm working. So we're closing out the 12-plex tomorrow, and we're under contract on another 5 seller finance, working on a 9-plex, an 8-plex, a 21-plex, and another 9. So solve the how do you buy it, deal that equity. We figured that out. The how do you never lose it part's the thing that people forget about, and we're about to jump into questions, so start dropping those if you've got questions. It's really easy to buy real estate, like really easy. And we're about to pick up another, I don't know how many units, but I'll be over 160 here in just a minute. And that's great. But if you buy 160 units and you don't know how you're gonna hold it forever, now you have a problem. Because a lot of people went out there just recently, bought 1,000 units, 2,000 units, or even just a couple hundred units, and now they're in jeopardy of losing everything because they didn't fix their variables. They didn't ask the question, how do I never lose this? You don't ask the question, you will not find the answer.

Yeah. Now on this 12-plex, this fits right into that strategy regardless of the economy. There's a seller who is willing to finance fixed rate, low interest debt, which makes the cash flow fantastic. Even with the— I think we have 2 vacancies at acquisition.

3. We had one.

All right, we have a move out going on.

Yeah, we just had to move out.

So this is going to be a deal that covers itself with 3 vacancies. 2 units already ready to lease up, uh, one I think needs some light TLC, and then away we go. It's a fantastic deal if you can cover all your expenses on a 12-plex with a quarter of your building So in a great place there, that plays right into the strategy.

Absolutely.

Now to whoever in the chat just said that we need a better fence around the jacuzzi, you are correct. I was supposed to do this last weekend, but in lieu of replacing an entire fence, because I have a bit of backyard, like a half acre, and fencing is expensive, I am doing arborvitae around the entire yard. I have finished almost all of it. I have not done that area there.

Done is better than perfect.

Check in in about— oh well, we don't do a lot of hot tub videos, but we'll do one in like a month and there'll be trees behind there. You won't see you see the fence, it'll be like it was never there.

I just appreciate that Christian bought the hot tub before he bought the fence because I want the hot tub more than I wanted to have his fence.

Yep, choose your expense. Mine was the hot tub. This was a celebration for our last refi.

All right, so we've got some questions and away we go. Are rates the same on a commercial loan as they are on small multifamily? So I'm going to assume you're talking 4 units or less. No, they're, they're not. Right now we got a $2.2 million, $2.3 million loan at 6.58%. A lot of my friends in the small resi space are in 7s, if not in the 8s.

And if you look at the prime rate right now, I believe it is 7.75, somewhere in there.

I like the, the mid-sized multifamily. There's a lot of discounts on the sub-50-unit range because a lot of people don't like to buy the sub-50-unit. It's more management intensive, so there's a lot of discounts for those. There's also discounts for having affordable rents slightly underneath the median. So we stay in that space where we have entry-level housing that is nicer than all the other entry-level housing in town. We make sure it's nice— stone countertops— and sub-50 units because we get the best rates on our loans. Now if we went super big and we started playing in the 200, 300 unit plus range, we'd probably get better loans, but we're not there yet. We don't qualify quite yet.

Yep, but it tends to be a little bit cheaper on the commercial side. However, it's just a different game. Your valuations are based on your performance more so than they are the how the neighboring properties are doing, and interest rates tend to be a little bit better on bigger assets because banks like lending on those. There's some stability with that.

Yeah, there's a lot more stability, and with stability comes better rates. So Someone asked, how do you go about raising money for a down payment? I don't have many people in my network with much capital, but I have a good-looking deal that's about $230,000 down, 14 units, and about a 17% cash on cash. Well, to get your cash on cash, you have to have a few pieces you haven't shared with us. You're going to have to have your debt. So what you've lined up already based on what you've shared is you have your deal, 14 units, you have your debt product, and you're going to make 17% cash on cash on $230,000. I like that a lot. That's like $40,000 a year in free cash flow. I think you can find the money for that, but, uh, that shouldn't be too hard. The order of operations for finding money— this isn't soliciting money, this is just how you structure any great deal with relationships that you've built— is you line up the deal, which you've done, then you put together the debt, which you've done. I'm guessing that's some sort of private money, probably seller financing, if you're getting that type of cash-on-cash return. Unless it's in the ghetto, which is also possible. Yeah, it could be in a a war zone. I don't know. But deal debt equity. Now you have to find the money. There's a lot of people that are interested in 17% cash on cash. A lot of people are interested in 12%. The trick is how do you find someone that's interested in 10 to 12 on a deal that makes 17 and you keep the difference? That's where you can really start to buy a bunch of real estate.

It's in a Gary zone, says Rob. Hopefully not. Oh no. Gary zone.

Gary in the air. Is Millennial Mike under, uh, in disguise? Undercover Mike?

By the way, Hey, quick announcement, uh, we're running our next event, the last one of the season. We're doing our Robin Hood Real Estate event. If anyone wants to be there, we just have one cabin left. You can always buy a day pass, but there's one cabin left. You can check it out on robinhoodvillageresort.com. We dropped the price because I just opened it, uh, we had a cancellation, so it's $250. It is a huge cabin, multiple beds. I think you can sleep like 6 people. So if you guys want to make it, there is one cabin available for that event. It's in Union, Washington this week. Check it out if any the 30. You guys want to make it, come hang out. Yeah, we want to see you there.

All right, so we've got a couple more questions here. What happens with the rents when you're in escrow? Do they still go to the current owner? So there's this thing called proration. Example, we're closing tomorrow, and it might close Friday depending on when it actually records with, uh, the county in Grant County. But we are going through, and it's going to be the 6th, 17th. And so 17 days out of a— I think we're in a 31-day month, right? March. Okay, so you just take 17 $1,419 divided by $3,100 and you're gonna get a ratio. It's a percentage. So that percentage is how much of the rents that the current owner, the seller, is gonna get and then the rest of it goes to us. We are prorating. So we're rationing the incomes that are collected for the month and we're splitting it equally because they owned it and we do the same with the taxes. We're gonna prorate the taxes. So I'm gonna pay the latter half of this quarter or I guess this— not quarter, that's biannual. We prorate it out and we pay half and they pay the other half.

Yep. But everything just gets balanced in escrow. That's not something that we really have to calculate. We double-check it at the last minute, but other than that, uh, very clean and simple.

Where did you find all these deals? From Space Cadet.

All right, Space Cadet. Well, what we did is we cultivated relationships with owners in that market. That is the majority of what we did. That being said, about 50% of our deals today have been on market, including the biggest deals we've done have been listed, some of them for years, where they're just not moving. And there may be something to negotiate beyond price. If you are trying to only use the bank as your only for acquisition, you're gonna need to meet appraisal. If you introduce creative finance, and there's a lot of different types of creative finance you can use, you're now looking at negotiating term, interest rates, special clauses. And so we found deals that sat around for a little bit, figured out what would make them work, and offered them. I call that the Kiyosaki method. That's exactly what they talk about in Rich Dad Poor Dad. And you buy it. Yep. And then the rest of it is we identified our goal and we met with the people in our market who've done what we want to do. Cody and I had this goal of let's get to 100 units together in 2 years. We met with almost everyone who had over 100 100 units or close to 100 units in the county we were buying in. Got coffee with them, didn't try to buy their stuff, but asked them, how did you get here? Then they helped us get here.

The person that we're buying from right now, I've never bought from. I've sold some of his properties for him as an agent, but I never bought anything from him. He built his $100 million portfolio through hotels. He just bought a huge hotel in Tacoma, but all local, and we're talking $10+ million deals. Yeah, he got started with the small ones. He did some, uh, small multifamily for stability because that helps out when the hills go down in the winter. But that— he built it completely different than the person who really helped me get started, who did it in small multifamily and then got into development. There's so many ways to play the game, but if you go in and just try and buy everybody's real estate, you're not going to learn how they did it.

Yep. The rule of thumb is there's no one who is better equipped to coach you on your goals than the people who've already done it in your market, in your location. That includes Cody and I. We have a mentorship group. We can give you all the nuts and bolts on how to pull this off, but at the end of the day, our whole mentorship group is about giving you a foundation, and then you go out and you You apply it by learning from the masters in your space and they become your actual long-term mentors, friends, and people who help you play the game. You want to check that out? MultifamilyStrategy.com. We finally got the "the" out of our URL, so new website.

Someone forgot to pay their bills, so we snagged it for $12.

Yeah, very happy about that. But yeah, check it out, MultifamilyStrategy.com.

All right, now here's a real one that a lot of people don't seem to understand. Where do you find investors? Who are investors?

Well, you find investors— well, I mean, really, who are they? Anywhere. Investors is anyone who has money they want to invest, and in our case, people who don't have money who want to invest.

Yeah, the quickest way to become an investor is to invest. And we like real estate, so we're always going to say real estate.

But if you want to meet other investors, you need to find other people who have properties. So where do they meet? Well, you can find their properties on Google Maps. All properties exist on that map. Figure out who owns it there. Show up at real estate meetups.

Yeah, but seriously, the Google Maps thing is so underrated. Yeah. Every property you want to buy is there.

Fact.

Just check our video out because people own real estate. Real estate's on the map. You call the people, learn how Now they bought the real estate and then you repeat it and buy the real estate.

I think it's our second most watched video. It's a big pink background, can't miss it. If you want to know how to find these, we show you exactly how we did it. I think it's like an 8-minute video.

Yeah, it's super simple. But that's how we find our investors, that's how we find our deals.

Yep.

It's really easy. Do you have to pay back investors with the refinance money?

Absolutely not. But you do have to pay back your investors.

With money.

So it could be out of earned income. If you have a high-paying job and you just write a check in the future, that's fine. You can arbitrage the time. And that's something that works. Or you can just do it out of cash flow, which is something that we've done.

Great example of that. We did a deal, we bought it for $30,000 down. This is a little triplex on the water, seller financed.

Oh yeah.

Yeah, it was super low money down, but $30,000 down. If you have a job where you can just save $10,000 a year and you borrow the $30,000, you need a 3-year note. And I'd probably ask for 5. You always want extra time. But if you don't have the money today, but you know you can save over a consistent period of time, arbitrage. Arbitrage is the fact that someone Someone else has money that they don't know what to do with, give them a great return, make sure you back it correctly. That's where your legal counsel comes in and build that relationship so you're not just trying to get money from random people. That's a no-no. But build the relationship first and when you find an opportunity that fits somebody's goals, share it with them.

And yeah, how do you meet those people? You show up where those people meet. So you show up at meetups, you talk to people online, you just network with people who've already bought a property. And the same way that we met all the owners and communicated our goals with them and they showed us how to play the game. Those are the same people who are going to help you move forward financially. Typically, if you meet with people who've invested for a long time, not only do they have properties, they also have money.

Dale asked if we market directly to owners or if we work with an agent. We do work with an agent, Eric Bubble. Yep. Foundation Group. He's awesome. He works in Washington and he sends us tons of seller finance deals. Not all of them fit our criteria, so feel free to hit him up.

Yep.

But he knows what he's doing.

Now, we still do a lot direct with owners. I'm not saying we don't do that, but we don't market to them. That is a phone call where I own a property next door to them.

Hey, we're neighbors.

Yep, we're property neighbors. I have a few other properties, wanted to get to know the other players in the game. The more real estate you buy, the easier that is. But when you get started, that's pretty much all Cody did, right? I mean, you just called owners. I did a mix of owners and brokers, and I found my first deal off-market through an owner. And Caleb and Chuck, who are on the channel frequently, a lot of you guys have heard from them at some point, they did everything through brokers. So you can do it either way, but that's the two ways to play the game. Just meet people who are playing the game. That's it.

Now from Rob, I like this one. Rob says I thought you guys were done with acquisitions and we're gonna work on optimization now and debt hammer. Seems like you jump back into acquisition.

So there are multiple cycles and multiple silos we put this in. This is actually— that is a fantastic question. So we have quarantined our first block of buildings. We picked up enough real estate to do what we wanted to do. We're still optimizing that real estate and that block is rolling down its debt in real time. In fact, we just paid off one of the lots there.

Yep, we just paid off our first piece of real estate. It is free and clear. Clear. That is the first deal I bought with Christian.

Now simultaneously, we're still buying and building that next staircase. All the new deals, we're always buying. Great, I mean, great opportunities come up, you close on them. Fantastic.

We also borrowed money out of the portfolio to optimize the real estate faster.

Yep. So you can do both projects at the same time. However, you have to hit your goal before you start optimization. On staircase 1, the 110 units in resort, that is block 1. We are taking that, optimizing it, and then we're paying all the down. In the meantime, we are gonna start staircase 2 and start building the long-term debt there. So when this is all paid off, we can take our paid-off block and start paying off block 2.

Then it's a debt snowball.

Yep. But we put each goal, match it to a unit count. So anyone who's setting your goals in real estate needs to know how much you need to buy. All you do is go, what, what life do I want to live and what does that cost? For me, I want a house in Washington that I have, I wanted my wife retired, which we made, and I want to have a primary residence residence in Texas, which I'm not there yet. So when I get there, the real estate we have right now optimized 100% gets me where I need to be. So that puts me in Texas, and for Cody, that retires his mom and gets her in a very nice condo.

It'd be nicer than anywhere I ever lived for a long time.

Yep. But we hit all those goals and we figured that cost— we need to pull about another $500,000 each, each out of the portfolio. So we need to have $1 million appear from our work.

Huzzah!

And the properties need to yield $20,000 each per month, which they're going to as soon as we finish optimization. So that block is done, no more encumbering it, pay it all the way down. And by the time that's paid down, we'll have a whole nother block of probably 250 to 500 units that we start hammering after that.

And to put it in perspective, start to finish, at that point it will have taken me 4 years from my first property to that point. It's sub-5 years to go from absolutely nothing to $20,000 a month net cash flow, in addition to all the equity growth and the millions of equity and the— all the assets. That was with no money, that was without any special bank loans in the beginning, no cosigners.

And while that seems fast, that is a lot of work and that is still not overnight. There's no such thing as getting rich quick, like, hey, I'm gonna buy a few properties and I'm done. A lot of people think that. However, you buy enough property, you stabilize and optimize that property, put systems in place, it's a— realistically, for most people, it's a 1 to 5 year period to be financially free.

Yep, and you can really solidify it in 10. Yeah, we have not proven that, so I'll quote Biden on this. I don't know that for fact.

However, we did get financial freedom in the first two. Solidifying it is gonna take more time.

Yeah, how do you own it? How do you own it? All right, so we've got some more questions from K3. I was able to negotiate 4 months deferred payments, 4.75% interest, but I have to bring $230,000 down. It's a 40-year AMM, 5-year balloon. Rents are $675 but could be raised to $800. Okay, I mean, that sounds like a great opportunity based on the inputs that you you're giving me, unless you're getting a great price and just putting a lot percentage-wise down, I have a feeling you're not going to be at 17% cash on cash on a 14-unit like that. I'm guessing not. With those rents, that doesn't sound feasible to me. However, I do like the debt structure. That's super creative. If you're getting 17% because you have no payments for 4 months, that's great, but that's not scalable because as soon as your payments start, you're going to lose money. So you need to make sure you can figure out how you never lose it because that is not a way to make sure you never lose it.

Yeah. And we've had properties that as part of the renovation have gone negative. It's not fun to float those even when it's part of your strategy. We made the decision to fast-track our stabilization optimization to do a lot of our evictions. Winter is a hard time to lease up. So we're like, you know what, let's start the process now. Let's start the renovation now.

Winter is coming and it did. It was hard.

It was very hard to get through. However, lease up is going fantastic now. We're leasing, we're pretty much finishing 2 units a week and leasing 1 to 2 units a week, which is better. Yeah. But you have to, if you want to keep your properties, best practice, don't let them go negative. It's really painful when you do.

Don't rock the boat if you can't afford to get wet. That's my favorite saying from my original mentor.

That is topical from the hot tub. Yeah, it is.

All right, let's see. How did you pay off your first piece of land? Well, this is a fun one. Yeah, we bought a 38-plex and came with an extra partial land in the beginning. So an encumbrance is a loan. We encumbered all the parcels. We are refinancing right now, and because the income is on the front buildings, we got we got the back building when we refinanced it to be completely separate. So that's not attached to the loan. We just signed a piece of paper and boom, free and clear land. It's like magic.

Yep.

But it's repeatable. Lenders like income-producing real estate, so we were able to shave off a piece of land that was not income-producing, and we'll use that to redevelop it later. What we put there, I don't know. Storage buildings? The world may never know. It'll depend on what the city says.

Caveat: if you're trying to pay off your real estate, you do have to pay it off. Moving around debt is one thing, and they got us free and clear It's just a game though. Yeah, and we did on another asset just write a check for what, $135,000?

$135,000, and we've done that a couple times this year. So you do eventually have to pay off your debt.

Yeah, eventually you have to pay it off with money. That's— we paid that one off with moving debt around. However, uh, how do you pay off your debts? With money is the answer. Moving it can only last so long.

It works till it doesn't, right?

That is not a long-term strategy.

All right, what does due diligence look like?

Well, due diligence Well, first of all, it looks like the one step that everyone seems to skip that you can't afford to skip.

So don't skip it.

Yeah, due diligence. So first you're gonna go under contract for a property based on what you believe to be true and what the owner said. We don't actually even make earnest money due until we're done with due diligence because I don't want to trust people. Yeah, and we've been burned too many times. Fortunately, never on the due diligence piece because we don't hand over any money until we verified everything. So you go under contract, number one, we have mutual acceptance, both parties have agreed on a transaction. Now you have to verify that all all your assumptions are true. On the financial side, you're gonna start with the rent roll, you're gonna grab bank statements, and you're gonna grab what are called tenant estoppel letters. Essentially, you're saying, what does the owner say the rents are and say the income is? Does that match what they deposit in the bank? It's very hard to forge a bank statement that matches your rent roll. Even harder to forge, you're gonna individually get a signed letter from every tenant, it's called a tenant estoppel. Every tenant says, this is what I believe my rent is and has been. And if all those things match, no one lied on the income finances. That's how you check those. As far as due diligence on the condition of the building, you're going to hire a home inspector or building inspector who's going to come in and give you a full inspection report. And you're going to make sure that it lines up with what you believe to be true of the condition of the property. Unless— there's one exception— unless, unless you are buying a property where you know that absolutely everything is bad and the inspection doesn't matter. The only times we did not get inspections is because we knew the septic was bad, we knew the roof was we knew the electric was bad, we knew the plumbing was bad, and it was all baked into the deal.

Yeah, I don't need to pay anybody $5,000 to tell me my stuff's bad.

Yeah. However, if you're expecting to get a fully functional building, pay for the inspection, make sure it's fully functional.

Alrighty. If you negotiate seller financing, is mortgage insurance required for that? Seems like on conventional loans mortgage insurance is required. Well, no, but you should get property insurance, and the lender, as long as they stay the lender, is typically going to want to be on that insurance claim because they need to get paid out.

Mortgage insurance is a dumb thing the banks invented to go, well, we can lend money, but when we get lazy and we lose money, we want insurance against these high loan-to-value things.

So let us do— let us make you get insurance and have you pay for it. Yeah, so we can give you these loans that we want to make money on.

Yep. Mortgage insurance goes under the category of a fee fee. It is a fee that they charge because they can. That is, uh, mortgage insurance is dumb. That doesn't exist in real business. And while banks can do whatever they want because they're the bank, that does not exist if you are making a deal with someone else. I have never heard of any sort of mortgage insurance on a seller finance note. I'm sure someone's tried to pull it off, but that would be highly irregular.

Also, if you're here, if you could hit the like button, that would help us a lot.

That's true.

We appreciate it.

40 people and 13 likes. I'm gonna hope that more than half of you like this. And yes, I don't— I always get the— I always get this feedback: I can't like it because the chat's in the way. You can hit X on the chat, hit like, and then hit join chat. And you can like it from your phone. We appreciate it.

I'm a seller finance real estate guy, not a like guy, but if you could help us out, we appreciate it.

Yes, we are grateful.

Alrighty, so let's see here. Would you recommend getting your realtor license helping others as a way to learn? I would not want to learn with others. That is a bad way. I wouldn't want to learn with someone else's money because then if you make a mistake, someone else pays it.

You should pay for your own mistakes, and you should have ownership of your own deals. So I would not say it is a good method to learn. If you're brokering, it's because you're a professional. And all the brokers that we work with, and I mean all of them, own real estate. Brandon Vuklich, Eric Bubble, they all are real estate owners, which helps.

Yeah, they know what they're doing. They've been through it a couple times.

I would not— I can't think of a condition I would work with an agent that did not own real estate unless they had a crazy deal and I had a broker who does own real estate representing me. But it's not good. So You don't need a real estate license to be an investor. There's only one way to do it. We cover this up and down our course. There's one way to be an investor. You invest in real estate. That's it.

Wow.

Yeah, it's true. And that could be a duplex, that could be a 12-plex. I don't care the size of your first deal. Some people get really caught up on that. It has to be a multifamily deal.

Buy a 12-plex. Yeah.

But either way, a duplex got me in the game. A second duplex got me more comfortable with construction. Then I bought a 38-plex with Cody. Cody did a 12, 12, and a 6. Ultimately, Cody got here faster because he started investing younger, but in a In about the same amount of time, we got to the same place. First deal size doesn't matter. Buying your first deal makes you an investor. I wish someone made it that simple for me when I started because I would own a lot more real estate today.

All right, let's see. Not sure what is the most time efficient if the end goal is financial freedom. Well, that tags off the first question again, your license. It's not efficient to add steps. Getting your license is adding steps. You want to be an investor, again, buy real estate. Now, how do you buy it? Deal, find it, then you're debt, you got to source it. And then your equity, if you need it, you'd have to figure that piece out. Doesn't have to be your money, but it has to come from somewhere. That's it. That's how you buy it. Now, the last question from him is, how did I manage my first 12-plex? Well, I posted notices saying where to pay the rent, and I paid my bills every month and hoped that my cash flow was higher than my expenses.

Now, when you started, I mean, you were mowing your own lawn.

Yep. I did everything.

Snaking your own septic, or not septic, but plumbing.

Yep. Snaking the plumbing, cutting open the walls, doing the electrical, getting zapped Learning my lesson.

I still get zapped regularly to this day. I'm a poor electrician. Cody can tell you, uh, he's seen me get zapped.

It happens.

Yeah, it's like, yeah, I'm a poor electrician. But sometimes you're there and you just get it done yourself. That's the one thing with owners, and this is really important if you want to own real estate. Passive income is not passive. That's— passive income is a tax designation, uh, that has nothing to do with the passivity of the project. Owners who don't pay attention to the real estate tend to lose their real estate.

I manage for owners who have done nothing on their property All Nighter Hider joined the chat.

Oh, okay.

He said, what the heck is this? Wrong channel, wrong channel.

The, uh, the fastest way— I want to finish this though because it's important. All Nighter, good to see you. We can now officially start. But when you don't pay attention to your property or you think it's totally passive and then you find out, wait, owners have to do anything? Yeah, owners have to do stuff.

Turns out you have an obligation to provide a great place to live, and if you don't, you're a slumlord. Yeah, don't be a slumlord.

We don't do slumlords. That's not good. We don't want to be a slumlord. We buy from slumlords, but then we fix the property. I mean, that's as simple as that. Okay, next question.

How do you structure the investors for the down payment? What's the interest? Well, you got debt or equity. You got your deal, then your debt, then your equity. And wow, it's too hot in here.

I know, now it's getting hot. The, uh, we'll see how long we can last. This was now a challenge. This started out as a relaxing thing, now I get sun and hot tub in Washington.

Rare things. Yeah, so it can be debt or equity, and the— your ability to get cash flowing debt is is really the bottleneck in business. If you borrow money from someone on something that does not cash flow and there's no possible way to get it to cash flow within a reasonable period of time, meaning the amount of time you have for reserve, that's a bad decision. You should only borrow money if it's paid for out of a business. If you have interest payments that you're taking on that you cannot float personally, you're making a poor decision. So if you're going to do it as debt, whatever interest rate cash flows and they're comfortable with, phenomenal. But if it doesn't cash flow enough, you might have to structure it an equity partner.

That's about it. What interest rate is totally, totally dependent on what interest rate you need. If you're doing debt, we have deals at 3% interest, we've borrowed at 18% interest to close the deal. All of those deals cash flow phenomenally regardless of the interest rate. Yep, it completely depends on the opportunity.

And our last one here from All Nighter Hiders: stimulate that like button, people!

Stimulate it! I don't like that. I said it out loud and I decided I don't like it.

Uh, very odd. But that's it for our questions. No, I'm kidding. It's live, but that's it. So if you have more questions, we're going to give you 20 seconds to drop it in here. Otherwise, we're going to burn to death. I'm a little warm.

Yep. Yeah, and we're just waiting for questions now. However, if you guys have questions midweek, feel free to reach out. You can hit me on Instagram @ChristianOsgood. You can find Cody @DoingCodyThings, because he is in fact always doing Cody things.

Fact.

And if you want to join our event, the last chance to sign up is the next 2 days. Saturday starts, main event is Saturday. If you want to stay the full 3 days, there's one cabin left, but Saturday, reach out to me on Instagram, I'll hook you up with the ticket. It's @ChristianOsgood. That event is gonna have some amazing guest speakers. Some of the BiggerPockets Rookie Podcast are gonna be there, our friends Savannah and Jake. We got an awesome, awesome lineup, and of course we'll be there, and we'd love to see all of you. You guys have been fantastic supporting our channel, and we would like to do our best to host you at our resort.

All right, so our last question of of the evening, before it's evening, is, uh, how do you deal with tenants that pay rent late? With grace. You got to be nice. They're still human. Stuff happens. However, uh, gentle and firm.

There is a point where you work with them, you have kind conversations, you reach out. However, on the paperwork side, we're still pretty good at— when rent's late and they haven't let us know, they immediately get a 14-day pay or vacate. That does not mean that we're kicking them out of the property.

It means not an eviction notice. Hey, you you should pay your rent.

We're just starting the first step of the process, and usually that stimulates rent. However, in this case, uh, with a few of our tenants, nothing helped and they didn't pay rent. So now we're going through the full eviction process. But when they start with late payment, sometimes people need help. The first thing you do is you reach out and you say, hey, I noticed rent was late. Is there anything we can do to help? Is there anything that we need to know? And that's it. It's a kind conversation. I like to do it in person when I'm in town. Knock on the door, open with a smile, and just say, wanted to make sure you're doing okay. How have things been? Notice rent was late. Is there anything that you need help with? That's, that's it.

All right, we got a couple more questions. We will keep going until we turn into prunes.

Let's do it.

I have 8 units, 2 duplexes, and 1 fourplex.

Awesome.

Do you guys— congratulations— do you guys think that's enough to get into considerably bigger assets? Absolutely. That's way more than Christian had before he bought a 38-plex. Yep, that's, uh, double Christian's portfolio.

And Cody started with the 12, which is bigger than all 8 units.

So if you want You want to go bigger, go bigger, but you're just going to have to figure out the same thing. You have to solve for how do you buy it and how do you never lose it. Deal debt equity, long-term fixed rate debt with cash flow and margin.

There's one thing that keeps coming up when we do podcasts, which by the way, if any of you guys have podcasts, I don't care if you have one follower, I want to be on it with you. But when we do podcasts, I hear from people who bought smaller real estate and they end with, wow, I love what you guys are doing. I really hope I could start buying bigger real estate in the next 2 or 3 years like you do.

Just start now.

It's like, that is the wrong mindset. That's the only thing I'll correct someone on, on their own podcast. I was like, no, just— you want to buy bigger real estate, the way to do that is to buy bigger real estate. If you add steps of I need to buy another duplex before I buy a 24-plex— if you want to buy a 24-plex, buy that. That's like saying I want to buy an Aston Martin, so I bought a Honda, and next year I'm going to trade it up for a RAV4 because that's a little bit nicer than my Honda Accord. It doesn't make any sense to add steps or to buy things that you don't need to hit your goal.

And by the way, back to the point earlier of people asking why we were getting back into this and buying a whole bunch more real estate right now— a whole bunch of people, including BiggerPockets, they're wrong said that nobody can make money right now.

I saw that post.

You're just wrong.

So BiggerPockets, we still love you.

We do, but you're wrong.

Yeah, on that one, you're just wrong.

That's just a bad post. So we're gonna go out and prove it. It's one thing to say it, it's another thing to prove it. We believe that there's gonna be a supercycle. There's gonna be a lot of people that struggle because they made bad decisions with debt.

Yep.

If you're responsible with debt, then you're gonna do better than those who are not.

And I noticed on that post from BiggerPockets, I don't know anyone who's making any money in real estate, there's a whole bunch of people who commented and they were all creative finance guys. They went, I'm doing seller financing, I'm still making money. Turns out if your cost of debt didn't change and rents are still going up, you make more money. We're still making money.

Okay, let's see here. Cody, spit some more knowledge for us in Tennessee next month. You know I will, Oren.

Oh yeah, we have an event in Tennessee. I've never been to Tennessee.

Let's do it.

So yeah, join that event. I know we post that on our story pretty frequently, but we'll drop a link in this once it's editable tomorrow. And yeah, just check my Instagram. I'll do a post later today if you guys want to see us in Tennessee for those out in the Midwest.

From REI Stoners, besides having money for down payment and inspection on seller financing, what percentage should you expect to pay an agent when you negotiate the deal or when they negotiate it? Typically they're making 3 to 4%, maybe 6 if they're double repping. It doesn't matter though. It really doesn't matter. I want my agents to get paid. I have a competition with myself to make my agent $250,000 in the next 6 months.

Because that means we bought enough real estate.

Yeah. It's all a function of percentage. If they get a percentage, that means you get a bigger percentage because there's never a point where the agent makes more than the buyer.

And the more they get paid, the more they want to call you for their next deal. If I am an agent and my livelihood is based on selling real estate, am I going to work with the guy who always makes sure I get paid and is fine with a 6% or a 3% commission? Or am I going to reach out to the guy who always negotiates my commissions down to 1% or 2%? Like, realistically, I'm going to call the guy who gets me paid, who I know is going to close. Yep. That's— it's that simple.

That's how we are with Eric. Eric finds a deal, We say yay or nay. If we say yay, we buy it.

And there's been no exceptions to that. If we have said yay and it's got accepted, we have closed it.

And we will continue to do that. We've had a video on this. I think I did this one solo, but your ability to strengthen your signature matters.

Yes.

If you can strengthen the power and the meaning behind your signature, meaning you signed for something and you will do it, you get a lot more opportunities, period.

I think we have walked on 2 deals during due diligence because they didn't work based on what we discovered during an inspection or financial If people lie, then you have to renegotiate. Those are the only two examples when we signed for a piece of real estate, we didn't buy it. It's because we didn't— we weren't being offered what we signed for, and that was the only exception.

Okay, let's see. Would either of you do a deal with a viewer? I found a great property and DM'd Christian.

Which—

you'd have to build a relationship with us first. We're not doing a deal with a random viewer.

I do— I get a lot of messages and I try to get through all of them, but sometimes the deals come in too many and I don't look through them.

Yeah, if you send a paragraph, probably not reading it. Sorry.

If you could put the deal in, would you look at this deal, and then tell me like 2 sentences about the deal?

We'll look at it. If it's 2, 3, 4 paragraphs, we've done that. We usually get to it after a few months, or we forget about it completely because we're not devoting that much time to someone we don't know. That's the whole thing we talk about in this channel. Relationships matter.

If it's in King County, Washington, the answer is always no. I do not like— I live in King County and I do not like this county.

How would you check comps? Rentometer, agents? Yes, you could ask agents. You can also use Rentometer. Rentometer's gonna be on the pass. You can call property managers, ask them for a place to rent. Act as if you're a tenant. Say, "Hey, I want to rent a 2-bedroom.

Do you have anything available?" Or check listing sites like Apartments.com or Rent.com, or there's a million of them. But what you do on those, anything in the past since rents have gone up is usually gonna be a little bit low. So Rentometer is gonna be a little bit lower than market typically. Apartments.com is asking, not actual. There's concessions that happen in there. People negotiate lower rent. So you want to be somewhere between the listings and a historic site like Rentometer. So you go, what has rented? We're probably a little above that. What's being asked for? We're probably a little bit below that. If you can balance in there, you're gonna get a good number.

Someone asked where the agent's commission comes from. It comes from down payment and seller pays for it typically.

Yep.

So I'm not wrapping into some financing. I'm not financing their commission. I want them paid. If I try and get them paid in 10 years from now, They're not going to do any more deals with me. They won't want to. They want to get money.

Now, if they're bringing up a deal and say it's seller financed, it's zero down, there's no down payment to pay them out of.

Then you're going to have to figure it out. You either finance it or you throw it on a credit card.

Or the seller might just write a check to sell it. And it could be any of those, but don't blow up a deal over a 2% or 3% commission to a broker.

Yeah.

If the seller's like, I don't want to pay commissions and there's no down payment, turns out your down payment's now 2% and that's fine.

Ta-da! And that's it. Just that simple.

Excellent. I'm too hot, so—

Me too.

Any other questions? No. Oh, thank God. Okay, quick, we're getting off. Everyone attend our, uh, event. I want to see more faces there.

And other than that, we appreciate you checking this out.

Yep, see you next week.

Boom shakalaka.